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Pension plan balance down? Here’s what to do.

It is important to contribute regularly to a retirement savings plan throughout your career. This way, you will have money to exploit in addition to the monthly benefits that you can collect from social security.

Now, you’ll generally hear that it’s wise to invest your retirement savings rather than leaving your IRA or 401(k) plan in cash. You need your savings to grow to outpace inflation and provide you with adequate purchasing power down the line.

But what if your IRA or 401(k) plan is down this year? If so, you’re in good company. The stock market has had an extremely volatile run, and we don’t even know what the last two months of 2022 have in store for us. And so, if you see losses in your retirement plan, here’s what to do.

A person with a serious expression in front of a laptop.

Image source: Getty Images.

1. Don’t panic if retirement isn’t near

If you’re years away from retirement, a shrinking portfolio shouldn’t actually throw you off too much. Of course, it can be unsettling to see the value of your investments drop. But if you don’t retire for 20 years, the events of 2022 could end up being entirely insignificant in the grand scheme of your investment window.

2. Make changes if retirement is near

If you’re about to retire and your IRA or 401(k) is down, you’re unfortunately in a different boat than someone who has years to wait for a stock market rally. Now, you don’t need to panic if you’re supposed to retire, say, next year. But you should check your wallet to see how much cash there is.

If you’ve suffered a major loss on the investment side, but have enough cash assets to cover a year or two of bills, your retirement plans may not be in jeopardy at all. Otherwise, you may need to consider postponing your departure from the workforce to give your wallet time to recover.

It also pays to consider moving some of your assets from stocks to safer alternatives, such as bonds. Of course, the tricky thing right now is that cashing in on the stock will likely mean a loss — which is another reason to consider pushing yourself to work a little longer if your IRA or 401(k) took a hit. very big blow.

3. Make sure your portfolio is diversified

The best time to move assets into your portfolio is usually when the market is bullish, not bearish. But if you review your investments and find that you have too much money in a particular market segment, it might be time to make some changes.

Even if you have an IRA that allows you to put money into individual stocks (whereas 401(k)s generally limit you to different fund choices), you may still want to transfer some of your money in broad index funds for increased diversification. And index funds are also a great bet for a 401(k), as their fees tend to be significantly lower than those charged by their actively managed counterparts.

Many people are currently seeing year-to-date losses in their pension plans. Obviously, this is not something to be happy about. But you shouldn’t assume your retirement is doomed. Even though this phase of life is fast approaching, you may be able to adjust your plans so that a volatile market in 2022 doesn’t have to doom you to years of financial upheaval.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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